Television chatshow king David Letterman has confessed to a string of affairs with female employees after falling victim to a $2m (£1.2m) blackmail plot.

The long-time host of America's top-rated Late Show admitted his dalliances to his studio audience last night after giving testimony to a grand jury in New York about the alleged extortion.

The suspect, Robert J "Joe" Halderman, was arrested yesterday and indicted on one count of attempted first-degree grand larceny, punishable from five to 15 years upon conviction, Manhattan district attorney Robert Morgenthau said.

Letterman, 62, said he was sent a letter by a man who threatened to reveal "terrible things" about his life in a film screenplay and book he was writing, unless the star paid up.

"What was all this creepy stuff?" said Letterman, who is married with a five-year-old son. "It was that I have had sex with women who work for me on this show. My response to that is yes, I have had sex with women on my show.

"Would it be embarrassing if it were made public? Perhaps it would, especially for the women."

A sombre-faced Letterman made the admission as the audience laughed and cheered, clearly believing his monologue during last night's show to be a joke.

The star did not say when the affairs took place, but explained that he felt menaced by the blackmail attempt, which began when he found a package in the back of his car as he went to work one morning about three weeks ago.

"There was a letter in the package. It says, 'I know you do some terrible things,'" he said. "It's a guy who's going to make a screenplay about me, he's going to take all this terrible stuff he knows about my life and put it in a movie unless I give him some money."

Letterman, who is one of American television's highest-paid performers with an annual salary of more than $31m, said he took the package to the special prosecutions bureau of the Manhattan district attorney's office, who helped set up a meeting with the alleged blackmailer at which a fake cheque for $2m was handed over.

It led to the arrest of Halderman yesterday, said to be an employee with the same CBS network who works on the true-crime show 48 hours. Halderman has been suspended.

Letterman was summoned to a grand jury hearing later yesterday at which he gave his side of the story. The jury will decide if there is enough evidence to bring charges.

"It's been a very bizarre experience," Letterman said. "I feel the need to protect my family, my job, my friends and everyone who has been supportive. I don't plan to say much more about it."

Letterman, who was divorced from his first wife in 1977, married his girlfriend Regina Lasko in March, more than 20 years after they began dating. Their son Harry was born in 2003, 10 years after he took over as host of the Late Show.

The star has had to contend with a number of stalkers during his career. In 1998, Margaret Ray, who has schizophrenia, spent two years in prison and a mental institution for breaking into his home and driving his Porsche. She then killed herself by kneeling in front of a train.

In 2005, police foiled a plot to snatch Letterman's then 16-month-old son Harry from his 2,700-acre Montana ranch and hold him for a $5m ransom. Kelly Frank, who worked as a handyman on the ranch, was convicted and sentenced to 10 years in jail.

In December 2005 a judge in New Mexico granted a restraining order against Letterman to a woman who claimed he was sending her coded proposals of marriage through his television show.

The infatuated fan, Colleen Nestler, accused the star of mental harassment by sending her "thoughts of love" across the airwaves. Letterman's lawyers quickly succeeded in having the temporary order quashed, claiming it was a "ludicrous abuse of the judicial process".